Contingent liability

A contingent liability is a possible liability of a business that arises from past events. The reason why the liability is “contingent” is that its existence (and final amount) can only be by the occurrence of one or more uncertain future events not wholly within the control of the business. For example, a business may be subject to a legal claim of some kind which may result in the business having to pay costs or damages. The outcome of the legal claim may be uncertain